Todayâs Backtested Stock Forecasts

Hi, we are testing out a new method for helping traders screen for potential trading opportunities and would like to get this forumâs thoughts and criticisms on whether this approach is time saving and useful.
First, a few 10 day forecasts based upon most Apr 2nd closing prices, that have high expected returns (based upon historical data):

How we derived these forecasts:
1. Everyday we track the values of a number of indicators for the most liquid 1500 stocks
2. We run a backtest for each indicator and each stock to calculate what historically happened to that stock 10 days after the indicator value is more extreme than it is now (for e.g if the 5 Day RSI for AAPL is 95 today, we calculate what happened to AAPL stock 10 days after the 5 Day RSI for AAPL was more than 95 using all available historical data)
3. Based upon these expected 10 day returns across multiple indicators across 1500 stocks, we filter which stocks that can be traded now have the highest historical expected return. So weâre basically answering the question: âbased upon our backtested results, which trades can I do today that have the highest expected return?â
4. A few of those top forecasts for today are above. You can use our tool (currently in beta at MktForecast.com and currently available for free) to filter by highest forecasts, lowest expected return, sectors, number of historical observations (so you could filter out the few trades above that only have a few historical precedents) and many other dimensions.

Hi, we are testing out a new method for helping traders screen for potential trading opportunities and would like to get this forumâs thoughts and criticisms on whether this approach is time saving and useful.
First, a few 10 day forecasts based upon most Apr 2nd closing prices, that have high expected returns (based upon historical data):

How we derived these forecasts:
1. Everyday we track the values of a number of indicators for the most liquid 1500 stocks
2. We run a backtest for each indicator and each stock to calculate what historically happened to that stock 10 days after the indicator value is more extreme than it is now (for e.g if the 5 Day RSI for AAPL is 95 today, we calculate what happened to AAPL stock 10 days after the 5 Day RSI for AAPL was more than 95 using all available historical data)
3. Based upon these expected 10 day returns across multiple indicators across 1500 stocks, we filter which stocks that can be traded now have the highest historical expected return. So weâre basically answering the question: âbased upon our backtested results, which trades can I do today that have the highest expected return?â
4. A few of those top forecasts for today are above. You can use our tool (currently in beta at MktForecast.com and currently available for free) to filter by highest forecasts, lowest expected return, sectors, number of historical observations (so you could filter out the few trades above that only have a few historical precedents) and many other dimensions.

Just to be clear, we're not recommending specific trades or selling proprietary indicators, but providing a tool that allows users to filter data in a way that saves them time. Our sense is that currently traders look at things such as highs and lows, but don't have a sense for whether these indicators actually backtest well. We're trying to provide them with more analysis to help them with something they already do.

If your point is that we are coming across as promising users a return and not as a tool to save them time, then we need to make sure thats not the case. Thanks for pointing this out.

Would appreciate any other thoughts you have on this matter.

Quote from Mysteron:

Predicting ahead 10 days

Absolute nonsense!

If this method had any merit for trading you'd keep it secret and use the method yourself and rake in the money!!!

But instead you try to suck in the gullible by 'offering' free access for a while, but not for long I expect.

Just to be clear, we're not recommending specific trades or selling proprietary indicators, but providing a tool that allows users to filter data in a way that saves them time. Our sense is that currently traders look at things such as highs and lows, but don't have a sense for whether these indicators actually backtest well. We're trying to provide them with more analysis to help them with something they already do.

If your point is that we are coming across as promising users a return and not as a tool to save them time, then we need to make sure thats not the case. Thanks for pointing this out.

Would appreciate any other thoughts you have on this matter.

More...

I don't want to be unfair, but I wouldn't exactly call this "backtesting." Backtesting implies an actual methodology that produces a result that is hopefully not curve fit. You appear just to be mining correlations that might or might not be random.

I guess I would be interested in how you think traders would use this data, or what you intend to offer in the future.

Its true that people use the word "backtesting" loosely. To state what you are saying another way, what we are doing is saying "the RSI for AAPL is 5, lets see what typically happens to AAPL subsequently every time the RSI was less than 5 in the past" and your point is that that is not backtesting because whether or not AAPL moves up or down afterwards may be random (or not).

What we noticed is that a lot of traders often think of this as "backtesting" and so we started off with a product for those people along the lines that they already think.

In terms of what our future services are likely to be, we're trying to access whether there would be interest in using the structure we've set up (with watchlists, screeners and pages with studies for each stock) to screen through trades generated from academically published work on indicators. Meaning, we'd take a body of quantitative literature, simulate the trading logic (which can be pretty complicated), estimate the expected PNL from each trade (likely at a portfolio level) and allow you to subscribe to the stream for a nominal price. Basically, we're interested in trying to make that literature more accessible (btw- the indicators we have now do not count as academically published). Would you be interested in something like this?

Thanks,

Quote from AAAintheBeltway:

I don't want to be unfair, but I wouldn't exactly call this "backtesting." Backtesting implies an actual methodology that produces a result that is hopefully not curve fit. You appear just to be mining correlations that might or might not be random.

I guess I would be interested in how you think traders would use this data, or what you intend to offer in the future.

Just to be clear, we're not recommending specific trades or selling proprietary indicators, but providing a tool that allows users to filter data in a way that saves them time. Our sense is that currently traders look at things such as highs and lows, but don't have a sense for whether these indicators actually backtest well. We're trying to provide them with more analysis to help them with something they already do.

If your point is that we are coming across as promising users a return and not as a tool to save them time, then we need to make sure thats not the case. Thanks for pointing this out.